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The Growth Portfolio finished October down 9.1% over the last year, the American Growth Portfolio declined 11.1%, and the Income Portfolio was down 3.2%.

October was a difficult month for equities, particularly within technology, semiconductors, and other growth-oriented sectors. The pullback has been severe enough that more than 60% of S&P 500 constituents now find themselves in bear market territory, having fallen at least 20% from their respective highs. Roughly half of U.S. stocks are down more than 30%. Several of the market’s largest technology companies have also experienced substantial drawdowns despite continuing to report strong operating results.

As is often the case during corrections, investors have become increasingly focused on finding a narrative to explain falling prices. Concerns surrounding artificial intelligence spending, infrastructure investment, and the durability of the current technology cycle have moved to the forefront. Yet many of these concerns are being raised against a backdrop of strong earnings growth, accelerating cloud adoption, and continued investment by industry leaders. That disconnect between perception and reality is one reason we believe it is worth examining past periods where investor psychology looked remarkably similar.

In 1998, a technology-led market was hit by a sharp correction amid financial stress, geopolitical uncertainty, and growing skepticism toward growth stocks. Many investors concluded that the technology boom had run its course. Instead, the correction ultimately proved to be an interruption in a powerful secular trend, not its conclusion. History never repeats perfectly, and today’s environment is clearly different. However, the similarities in investor psychology are difficult to ignore. Much like 1998, investors appear increasingly eager to interpret weakness as evidence of a structural collapse, even as many of the underlying fundamentals remain remarkably strong.

Recent earnings from major artificial intelligence companies continue to point toward robust demand. Cloud growth remains strong while capital spending plans continue to expand. At the same time, sentiment surrounding artificial intelligence remains deeply divided. Entire communities of investors have emerged around the view that the economics are unsustainable and that the opportunity is overstated. That level of skepticism is noteworthy. Major bull markets rarely end when investors are still arguing about whether the underlying theme is even real.

More important for investors today is the opportunity created by the recent selloff.

Recent market action contains many of the characteristics historically associated with important lows rather than major tops. Defensive positioning has surged. Flows into inverse products have accelerated. Short-selling activity across technology and volatility-linked securities has risen sharply. Many momentum strategies have experienced some of their most severe drawdowns in years. Meanwhile, several measures suggest selling pressure is fading beneath the surface.

Our attention remains focused on areas where investor fear appears most disconnected from underlying fundamentals. Semiconductors continue to stand out as one such opportunity. Following substantial corrections over recent months, many companies within the sector are entering a seasonally favourable period while demand associated with artificial intelligence and digital infrastructure remains robust.

None of this guarantees that volatility is behind us. However, the combination of washed-out sentiment, bearish positioning, improving volatility measures, and resilient economic activity increasingly resembles past corrections that eventually gave way to renewed advances. While this bull market is now entering its fifth year and opportunities may become more selective as the cycle matures, we continue to believe the balance of evidence points toward another meaningful advance before the cycle ultimately concludes.

For investors with excess cash or capital sitting on the sidelines, periods like these have historically provided some of the most attractive opportunities to deploy it. Though short-term volatility may persist, we believe the current environment offers an increasingly compelling entry point for long-term investors.

Model Portfolio Highlights
Growth Portfolio: During October, we trimmed our position in Thomson Reuters to establish a new investment in Telus and Shopify. We also exited Intel and added to Micron Technology, where we see greater upside potential. Finally, we initiated a new position in cybersecurity company CrowdStrike, which we believe is well positioned to benefit from strong long-term demand for digital security.

American Growth Portfolio: Positioning remains broadly aligned with the Growth Portfolio, including increased exposure to semiconductors, cybersecurity, and other areas where recent market weakness has created attractive long-term opportunities.

Income Portfolio: During October, we exited our broad Canadian equity exposure and increased the portfolio’s allocation to the S&P 500. We believe the U.S. market currently offers a more attractive combination of earnings growth and exposure to technology themes. We also closed our long/short beta hedge and increased our allocation to Canadian banks, which we believe offer attractive valuations.

Our approach targets opportunities with a significant margin of safety with minimal risk of permanent loss. Patience remains essential in realizing long-term gains.

We advise families and individuals with $1 million or more in investable assets who value prudent stewardship, independent thinking, and a long-term approach to preserving and growing capital. If this approach aligns with your own, we would welcome a conversation.

Thank you for your continued trust.

Yours,

Ben

Ben W. Kizemchuk
Portfolio Manager & Investment Advisor
Wellington-Altus Private Wealth

Office: 416.369.3024
Email: bwk@wellington-altus.ca
Book time with Ben W. Kizemchuk: Portfolio and Plan Review

Ben Kizemchuk offers full-service wealth management for high-net-worth Canadians including families, business owners, and successful professionals. Ben and his team provide investment advice, financial planning, tax minimization strategies, and retirement planning.

Performance reporting disclaimer: Performance results reflect the returns of each representative model portfolio. Returns are calculated using each model portfolio’s monthly performance, including changes in securities values, and accrued income (i.e., dividend and interest), against its market value at the closing of the last business day of the previous month. Performance results are expressed in the stated strategy’s base currency and are calculated on a net of fees basis. Individual account performance may materially differ from the representative performance history set out in this document, due to factors such as an account’s size, the length of time the strategy has been held, the timing and amount of deposits and withdrawals, the timing and amount of dividends and other income, and fees and other costs. Investors should seek professional financial advice regarding the appropriateness of investing in any investment strategy or security and no financial decisions should be made solely on the basis of the information provided in this document. This is not an official statement from WAPW. Please refer to your official WAPW statement for your specific performance numbers.